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Inventing a Better Patent System

GARY LOCKE, the secretary of commerce, has urged Congress to overhaul the nation’s patent law by the end of the year. Although a bill has been circulating since 2005, a fierce fight involving the high-tech and drug industries on a technical issue — how to measure damages when a company violates a patent applying to one component of a larger product — has kept it from reaching a vote.

The best way forward is for Congress to sidestep the damages question and instead add five amendments to existing statutes that would improve the processing of patents, reduce lawsuits and speed up the arrival of innovations on the market.

The quality of American patents has been deteriorating for years; they are increasingly issued for products and processes that are not truly innovative — things like the queuing system for Netflix, which was patented in 2003. Yes, it makes renting movies a snap, but was it really a breakthrough deserving patent protection?

One root of the problem is that patent examiners, many of whom are young or lack practical experience, are not qualified to evaluate whether complex claims in biotech or physics meet the most critical tests: whether the claim is novel relative to prior art, and whether this would be obvious to a person skilled in the art. To help fix this, Congress should pass an amendment allowing experts in the field to submit explanatory or critical comments on patent applications.

Currently, most such evaluations are prohibited “without the express written consent of the applicant.” But academic scientists and industry researchers are the best judges of an application’s novelty. Their input would help federal examiners better understand the merits of claims. True, outside comments would likely elicit disagreements from the applicant — but it is better to have this debate first rather than waiting until after patents are granted and taking it to the courts, as we do now.

Next, Congress should require that all applications be made public 18 months after they are filed. Applicants can now sidestep publication until the patent is awarded simply by certifying that they will not seek the same patent in a foreign country. Such secrecy is inconsistent with international practice, and keeps rivals of the applicant in the dark until the process is completed. This may well be several years, during which time competitors may waste time and money developing the same invention.

Third, under today’s system, interested parties can challenge a patent after it is granted in two ways: in court or in an administrative proceeding called an opposition. Oppositions are widely used in Europe because they are faster and less expensive than court cases. In the United States, however, oppositions are relatively rare — in large part because if the challenger loses the hearing and then tries to challenge the patent in court, she cannot assert that it is invalid on any ground he raised or “could have raised” during the opposition.

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While it is reasonable to prevent someone from rearguing a claim that has already been adjudicated in an opposition, it is unfair to prohibit plaintiffs from bringing up claims that were never raised in the hearing. Congress should eliminate the “could have raised” clause.

Fourth, Congress should provide limited new immunity to all inventors who choose to protect their innovations as “trade secrets” rather than patents. A trade secret — like the formula for Coca-Cola — is an innovation that is kept confidential by company procedures like contractual covenants. Innovators may choose the trade secret route over the patent application for many reasons — for instance, they may not have the time or money to pursue a patent.

In most foreign countries, inventors with trade secrets are protected from infringement suits if they have been using the secret innovation for some time, another firm independently develops a similar innovation and obtains a patent for it. This protection is called “prior user rights.” In 1999, Congress limited prior-user rights to “business method” patents like Netflix queuing; the statute did not cover prior uses of machines or other actual products. Congress should extend protections to prior users of all types of patents.

Finally, Congress should adopt a “first to file” rule for awarding patents between competing parties. America is the only major country that tries to ascertain who was the first applicant to invent the product or procedure. This may seem fair, but long proceedings to determine precisely when each party conceived an idea result mostly in keeping innovations from hitting the market.

Congress shouldn’t make the best the enemy of the good. If it avoids the tricky question of damages measurement and adopts these five amendments, it would weed out low-quality patent claims, reduce the number of expensive lawsuits and reward our best innovators.

Robert C. Pozen, the chairman of MFS Investment Management and a lecturer at Harvard Business School, is the author of “Too Big to Save.”

A version of this op-ed appears in print on November 17, 2009, on Page A33 of the New York edition with the headline: Inventing a Better Patent System. Today's Paper|Subscribe